Cash-rich education institutions reshaping Hong Kong’s prime office market – South China Morning Post

Report on Hong Kong’s Office Market Recalibration and its Alignment with Sustainable Development Goals

Executive Summary

Hong Kong’s prime office market is undergoing a significant transformation, characterized by the expansion of the education sector into Grade A office spaces. This trend, occurring as traditional financial tenants downsize, signals a diversification of the city’s economic base. This report analyzes this market shift and its direct contributions to achieving the United Nations Sustainable Development Goals (SDGs), particularly in education, economic growth, and sustainable urban development.

Analysis of Market Dynamics

Recent data indicates a recalibration in occupier demand within Hong Kong’s commercial real estate sector. The key findings are as follows:

• Overall Market Growth: Total occupied office space reached 73.4 million sq ft, an increase of 1.1 million sq ft from 2022.
• Emerging Sector Expansion: Education institutions and non-bank financial firms collectively expanded their footprint by over 430,000 sq ft, indicating a dynamic shift in demand.
• Comparative Occupancy Rates:
  • The banking and finance sector currently occupies 27% of prime office space.
  • In contrast, the combined education, healthcare, and medical sectors account for 4%, but this figure represents a growing and increasingly active segment of the market.

Implications for Sustainable Development Goals (SDGs)

The observed market trends have significant positive implications for several SDGs:

1. SDG 4: Quality Education

   • The expansion of educational institutions into prime real estate signifies a robust investment in the sector’s infrastructure.
   • This growth directly supports the goal of ensuring inclusive and equitable quality education by enhancing the capacity, accessibility, and visibility of educational services within the urban core.

2. SDG 8: Decent Work and Economic Growth

   • The rise of the education sector as a major office tenant demonstrates a diversification of Hong Kong’s economy, reducing over-reliance on the financial industry.
   • This shift promotes sustained and inclusive economic growth by fostering a new industry and creating diverse employment opportunities, contributing to economic resilience.

3. SDG 11: Sustainable Cities and Communities

   • The adaptive reuse of prime commercial space for educational purposes contributes to making cities more inclusive, resilient, and sustainable.
   • This recalibration of the urban landscape ensures that existing infrastructure is utilized efficiently to meet evolving social needs, fostering a more balanced and sustainable community.

Conclusion and Outlook

The growing presence of the education sector in Hong Kong’s prime office market is a key indicator of a structural economic evolution. While the financial industry remains the largest tenant, the active expansion of education signals a strategic alignment with global sustainability priorities. This trend not only strengthens the city’s economic diversification but also marks tangible progress towards achieving the Sustainable Development Goals, fostering a more resilient, educated, and sustainable urban future.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article highlights issues that connect to several Sustainable Development Goals (SDGs), primarily focusing on education, economic growth, industry, and urban development. The main SDGs identified are:

• SDG 4: Quality Education – The core theme is the expansion of the education sector, which is directly linked to providing quality education.
• SDG 8: Decent Work and Economic Growth – The article discusses a shift in Hong Kong’s economy, with the education sector emerging as a growth driver while the traditional finance sector downsizes, pointing to economic diversification.
• SDG 9: Industry, Innovation, and Infrastructure – The text describes the adaptation of urban infrastructure (prime office space) to support a growing industry (education), backed by government support.
• SDG 11: Sustainable Cities and Communities – The “recalibration” of Hong Kong’s prime office market reflects changes in urban land use and planning, which is central to sustainable urban development.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the article’s discussion of the expanding education sector and its impact on the urban economy and infrastructure, the following specific targets can be identified:

1. Target 4.3: By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university.
   • Explanation: The article states that “education institutions” are expanding their physical footprint by “over 430,000 sq ft”. This expansion of facilities is a fundamental step towards increasing access to tertiary and vocational education for the population.
2. Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors.
   • Explanation: The article describes a “dynamic shift in occupier demand” where the education sector, an “emerging industry,” is growing while the traditional finance sector downsizes. This points directly to economic diversification away from a heavy reliance on finance and towards a growing, high-value sector like education.
3. Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure… to support economic development and human well-being.
   • Explanation: The article discusses the repurposing of prime office buildings—a key component of urban infrastructure—to accommodate educational institutions. This adaptation of existing infrastructure to support a new and growing economic sector aligns with developing resilient infrastructure that can meet changing demands.
4. Target 11.3: By 2030, enhance inclusive and sustainable urbanization and capacity for… integrated and sustainable human settlement planning and management.
   • Explanation: The article’s focus on “Hong Kong’s grade A office market entering a new phase of recalibration” is a direct example of urban land use management. The shift from commercial finance tenants to education providers demonstrates how the city’s urban planning is adapting to new economic and social demands, contributing to sustainable urbanization.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article provides several quantitative and qualitative indicators that can be used to measure progress towards the identified targets:

• Indicator for Target 4.3: The physical expansion of educational facilities.
  • Specific Data: The article explicitly mentions the “expansion of over 430,000 sq ft by education institutions.” This figure serves as a direct indicator of the growth in infrastructure dedicated to education.
• Indicator for Target 8.2: The changing share of economic sectors in the prime real estate market.
  • Specific Data: The article provides a baseline for measuring economic diversification by stating that the “banking and finance sector… occupies 27 per cent of prime office space,” while “education, healthcare and the medical sector combined account for only 4 per cent.” Tracking the change in these percentages over time would indicate progress in economic diversification.
• Indicator for Target 9.1: The amount of infrastructure repurposed for new industrial or social uses.
  • Specific Data: The 430,000 sq ft of office space now occupied by education institutions is a quantifiable measure of infrastructure adaptation.
• Indicator for Target 11.3: Net absorption rate and composition of tenants in the commercial real estate market.
  • Specific Data: The article notes that total occupied office space increased by “1.1 million sq ft more than… in 2022.” The analysis of who is occupying this new space (e.g., education vs. finance) is an indicator of how urban land use is evolving to meet the city’s needs.

4. Table of SDGs, Targets, and Indicators

Source: scmp.com